Greek banks face closures, bailout or not: Sources

FRANKFURT: Some large Greek banks may have to be shut and taken over by stronger rivals as part of a restructuring of the sector that would follow any bailout of the country, European officials have told Reuters. European leaders will gather on Sunday in a last-ditch attempt to salvage agreement with Greece after months of acrimonious negotiations that have taken the country to the brink of leaving the euro. But regardless of whether or not fresh funds are now unlocked for the government, some Greek banks, damaged by political and economic havoc, may have to be closed and merged with stronger rivals, officials, who asked not to be named, told Reuters. One official said that Greece's four big banks - National Bank of Greece, Eurobank, Piraeus and Alpha Bank - could be reduced to just two, a measure that would doubtless encounter fierce resistance in Athens. A second person said that although mergers of banks were necessary, this could happen over the longer term. "The Greek economy is in ruins. That means the banks need a restart," said the first person, adding that prompt action was necessary following any bailout between Athens and the euro zone. "Cyprus could be a role model." "You have a tiny bit of time ... you would do restructuring straight away." Greece's financial system has been at the heart of the current crisis, haemorrhaging deposits as relations between the radical left-wing government of Prime Minister Alexis Tsipras and creditors worsened. After Athens defaulted on debt owed to the International Monetary Fund last month, the ECB froze emergency funding for the banks, precipitating their temporary closure and a 60-euro daily limit on withdrawals from cash machines. A decision by Greek voters last week to reject bailout terms offered by the country's international creditors prompted the ECB to maintain its cap, meaning that the banks will run out of cash soon. LIQUIDITY AND SOLVENCY A year ago, Greece's bankers thought they were on the cusp of a new era. They had restructured as part of the country's bailout deal, had raised fresh equity from international investors and had regained access to debt markets to fund lending. But the economic and political turmoil that has ensued since Tsipras came to power in January means that they are dangerously short of cash. Even after the immediate liquidity problems are worked out, any restructuring of the sector would first require a prompt recapitalisation of Greece's strongest lenders because rising bad debts and exposure to Greek government bonds mean they are in danger of becoming insolvent. A timeline and exact plan for the sector's revamp could be finalised after a recapitalisation. Such action would face stiff political resistance in Athens, where Tsipras has pledged to 'restore our banking system's functioning'. Bank mergers save money but cost jobs, making them unpopular. Reflecting such obstacles, a second person said: "There would be an interest in having less banks ... but I'm wondering whether this would make sense in the short term." Any closures, which would be managed primarily by Greek authorities under the watch of the European Central Bank's supervisors, would not typically affect customers as their deposits and accounts would migrate to the bank's new owner. Greece's finance ministry was not immediately available for comment, while a spokeswoman for the ECB said: "The ECB Banking Supervision is closely monitoring the situation of Greek banks and is in constant contact with the Bank of Greece." CYPRUS MODEL Any such revamp would be a stark reminder of the withered state of the country's financial system, where deposits had shrivelled to their lowest level in more than a decade before savers were forced to ration cash withdrawals. Of Greece's four big banks, National Bank of Greece, Eurobank and Piraeus fell short in an ECB health check last year, when their restructuring plans were not taken into account. Only Alpha Bank was given an entirely clean bill of health. A restructuring could follow a similar pattern to Cyprus, where one of the island's two main banks was closed as part of its stringent bailout, and Ireland, where three lenders were either shut or merged with rivals. But a senior Greek banker, while acknowledging that the ECB could embark on fresh stress tests and "set the recapitalisation, restructuring process going again", said any mergers would reduce competition. "If the argument is cost efficiency and whether Greece is overbanked, with four players there is a semblance of competition," he said. "With fewer players, competition will be reduced even more."

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BRUSSELS: European leaders Monday pleaded with Greek voters to back hotly disputed bailout proposals in a crunch referendum or face leaving the euro as bank closures left many in Greece scrambling to find cash. On the eve of an expected debt default that could set Greece on the path to a euro exit, Prime Minister Alexis Tsipras sought to calm nerves by leaving the door open to talks, saying the July 5 plebiscite on creditors' latest cash-for-reform plans would leave the country "better armed" in the fight for a debt deal.

ATHENS, Greece — Greece’s government was racing Thursday to finalize a plan of reforms for its third bailout, hoping this time the proposal will meet with approval from its European partners and stave off a potentially catastrophic exit from Europe’s joint currency, the euro, within days.
Details of Greece’s reforms are to be submitted Thursday, giving time for creditors to review them ahead of a summit of the European Union’s 28 members set for Sunday.

ATHENS, Greece — Greece’s government was racing Thursday to finalize a plan of reforms for its third bailout, hoping this time the proposal will meet with approval from its European partners and stave off a potentially catastrophic exit from Europe’s joint currency, the euro, within days.
Details of Greece’s reforms are to be submitted Thursday, giving time for creditors to review them ahead of a summit of the European Union’s 28 members set for Sunday.

ATHENS/BRUSSELS: Germany all but buried negotiations to keep Greece from default on Saturday, saying a surprise decision by Greek Prime Minister Alexis Tsipras to call a referendum had left nothing to discuss but how to cope with failure. Worried the country could default and even leave the euro zone, some Greeks queued up at cash machines to withdraw funds, though there were no signs of panic in Athens. Many sounded defiant, saying Tsipras had offered them an important chance to determine their own fate.

ATHENS: Greece said Friday it is still hopeful for an 11th-hour deal with its creditors before it defaults on its debt, as the ECB threw Greek banks another lifeline and depositors withdraw their savings. "Those who invest in crisis and terror scenarios will be proven wrong," Prime Minister Alexis Tsipras's office said, amid reports that Greeks banks were facing an increase in withdrawals.

Athens (AFP) - Eurozone finance ministers were set to hold crunch talks over Greece Thursday, after a barrage of warnings that the country risks a damaging exit from the EU if it fails to strike a deal with its creditors.

ATHENS — As Greece’s creditors line up to oppose the country’s demand for a debt restructuring, Prime Minister Alexis Tsipras’s refusal to accept more bailout loans may result in a cash crunch as early as next month, two people familiar with the country’s financial position said.

One phrase echoed from Brussels to Frankfurt and Washington as Greece’s creditors examined and then waved through the country’s new economic policies: “starting point.”
While the month-old government in Athens was praised for coming up with a workable package of measures including maintaining state-asset sales and collecting more tax, the European Commission, European Central Bank and International Monetary Fund all warned that action speaks louder than words.